SAP announced major executive board level changes on Sunday. Léo Apotheker moves out out as CEO and in comes Bill McDermott, head of the field operations, and Jim Hagemann Snabe, head of product development, who will now share the top job. Interestingly, SAP promoted Vishal Sika, chief technology officer (CTO) to the SAP Executive Board.

Joab Jackson and Chris Kanaracus have an excellent write up at Computerworld, with some excerpts from an internal email from Apotheker to SAP employees. I found in it a curious piece of information :references to the results of a recent SAP employee survey, which found a dramatic loss of confidence in senior management, according to a Financial Times report.

In the conference call earlier this morning, Plattner sounded a humble note on SAP’s unilateral decision to increase its software maintenance fees, in the midst of a recession. As reported by Computerworld:

He addressed head-on one of the most heated issues in SAP’s recent history: Its 2008 decision to move customers to a richer-featured but more expensive Enterprise Support service. The plan rankled users worldwide, particularly those with older, stable systems and little need or desire for additional support.

“I was part of the decision that we had to raise maintenance fees,” he said. “That is not something we can put in Léo’s shoes. This was done by SAP. We made a mistake and we have to change course here, and regain trust from the customers who were more than upset. Unfortunately, the head of the company takes the blame, whether it was just or not.”

It is well known in the industry circles that SAP by showing cost-of-living indices managed to push maintenance fees at around 22% despite several customer misgivings.

On the same development, Bob Evans has a very good piece in InformationWeek on SAP’s failure to put its customers front and center:

Speaking in broad strokes about trust and the need to rebuild it, Plattner said this: “What SAP has to re-establish is that we have trust between all involved parties: the [SAP] Supervisory Board, [SAP] Executive Board, the co-CEOs, the management team, the employees, the works council, the partners, the customers, and the employees working for our customers.” Do read Bob Evan;s very insightful perspective on the order of importance provided to various stakeholders therein.

For me, the issue that bothered the most :Why did the customer backlash was so felt? Even when Leo assumed office, it was widely believed that SAP needed someone to destroy the set ways of doing business fully factoring in the market transitioning away from the upfront license and implementation and operating cost model. When the year-on-year spend on SAP kept to be a very large numbers, business concerns on SAP spend was always an agenda item for discussions inside enterprises. When the 2008-2009 slowdown happened, while the IT spend was coming down, many were seething when the big ticket items like that of SAP spend could not be touched at all and there was really very little that business could to step out of this logjam! In fairness to SAP, this might have been generally tue of most of the big on-premise enterprise software vendors, but SAP probably had to bear the brunt as the core/ frontline software inside many business. This at a time SaaS & Cloud were the ringing buzz all across the enterprise while like the big old iron – SAP was there reminding business of the just gone era’s model of software and operations! The need for innovation in the SAP eco-system has been amply clear – customer’s were always vocal about this – but the almost regimented groups within SAP appears to have hardly got it and continued to persist on the past operational models – we are now going to see what quick steps SAP takes to reposition itself – how it becomes more agile, nimble , caring and friendly to customers. There are some tough and challenging positions that SAP may have to take to move forward and come out successful – the talent is there, the heart seems to be there going by Hasso’s comments– fast execution would make the ultimate difference here.

There are great lessons here – When a company gets dangerously out of touch with what its customers do and want and need, and with how those customers rate and reward IT vendors in these days – there is a big discernable shift – the ringing message is customers want to do a great deal more with a whole lot less. In an age of short cycles, the model of software product companies trying to harvest with almost EOL products with maintenance coming at a high price when the commercial barriers to adoption of the next generational technology constantly coming down is quite comical to say the least. The whole enterprise software ecosystem is closely watching the next steps here and what happens here wil in many forms affect the entire enterprise software ecosystem. I do no want on –premise enterprise systems to be thrown out with the bath water, though. Without doubt, wherever designed and implemented properly, these systems continue to serve the their purpose . What comes in the way is their rigid and sometimes monolithic architectures, which bring unreasonable rigidity and inject unwanted complexity in the way business can leverage them. With the result, they tend to become a costly asset akin to an old utility that needs massive budgets for maintenance – whereas identical spend in newer technologies can perhaps yield far better business demonstrable business results. My wish is simple :Like in the world of mass customization – I want simple, service enabled modular functionalities with multiple delivery options – On-premise, SaaS & Cloud based made available and with reasonable integration/orchestration mechanisms these can be brought together on need basis and which can bring down the TCO of enterprise software adoption while simultaneously ,increasing business benefits realized!

As I see it, gone are the days of investments centered on big-bang inititatives. In the userbase that am interacting with, there’s almost a near fatigue effect all around when it comes to fresh IT investments, while supporting existing/ongoing initiatives consume most part of the planned spend budget. Here comes the opportunity actually – this forces people to think of highly innovative and purposeful initiatives – this opens the space for newer software players with fresh solutions – big monoliths obviously can’t get there that fast. Smaller software players who have been weakened by the onslaught of consolidation and slowdown, unfortunately would fall by the wayside. In sum the situation is slowly but surely opening up opportunities for fresh play. Some see it as SaaS opporunity, some see it as new players ..but for sure a slow but steady momentum is building up in search of the elusive futuristic solutions and no software vendor – however big and mighty can ignore /try go against the stream or swim slowly along the stream!

Global Vice President & Business Leader - Digital Experience & Marketing, Collaboration, Content and Social lines of business for HCL Technologies. He has led international teams and initiatives for large enterprises and leveraging digital technologies to create change, focused on enabling new client experiences, creating new customer markets, & fragmenting markets to destroy existing value chains, by working with clients to shift value within and across industries, change the nature of industry control points, & redefine how work is done.